Creditor Rights, Organized Labor, and Government Intervention
Bradley S. Blaylock
Oklahoma State University - Spears School of Business
University of Toronto - Rotman School of Management
Jared R. Stanfield
University of New South Wales (UNSW) - School of Banking and Finance; Financial Research Network (FIRN)
October 22, 2012
24th Australasian Finance and Banking Conference 2011 Paper
The U.S. Government’s intervention in Chrysler LLC’s bankruptcy resulted in secured creditors receiving substantially less than the face value of their claims while an unsecured creditor, the UAW, received a substantial payment in exchange for their claims. We observe an increase in borrowing costs (changes in loan spreads and bond returns) for firms that are seen to have weakened creditor rights as a result of the precedent set in the Chrysler bankruptcy. Our findings underscore the potential costs of increased uncertainty about the enforcement of creditor rights and the potential impact of the government and labor on debt contracting relationships.
Number of Pages in PDF File: 54
Keywords: Organized Labor, Bankruptcy, Government Intervention, Cost of Debt
JEL Classification: G32, G33, G38working papers series
Date posted: August 22, 2011 ; Last revised: November 29, 2012
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